Small Business Owners: Stop Whining and Learn to Love Wal-Mart

Last Updated Feb 15, 2011 4:49 PM EST

Wal-Mart 's recent push to build stores in the New York City market has many small business owners up in arms. As always, when the retail giant lumbers into town, there's passionate debate on all sides of the issue. Wal-Mart will create jobs and stimulate the economy, say its fans; detractors claim Wal-Mart destroys local economies while paying sub-par wages and draining community resources.

Chris Zane has a radically different perspective than most small business owners. Zane is the owner of Zane's Cycles, a bicycle shop in Branford Connecticut that has grown to over 10 million in sales by cultivating an over-the-top customer service culture, and then leveraging that strategy in the highly lucrative special markets industry. Zane, who I featured in my first book, Alpha Dogs is, has written a book of his own called Reinventing the Wheel: The Science of Creating Lifetime Customers (BenBella Books, March 2011). Frankly, you'd expect the guy to hate Wal-Mart as much if not more than any other small retailer. But in fact, it's just the opposite. Here's why Zane thinks that all small business owners should learn to love Wal-Mart:

  • Wal-Mart is a case study in how not to run your business. "Unless you're going to be Wal-Mart, Wal-Mart is an example of what not to do," says Zane. "The lighting, the display, the layout--you shouldn't copy any of it. And Wal-Mart is a big vanilla envelope with stuff in it. Don't focus all your marketing on lower prices, and being all things to all people; think about how you want to be different." For instance, Zane's offers all customers a lifetime warranty on parts and service, has a coffee bar where customers can enjoy a free latte or Snapple, and offers a 30-day no questions asked return policy on all of its bicycles.
  • Wal-Mart gets price-focused customers out of your store. "Let Wal-Mart take those customers," says Zane. "Remember that 30% of customers are focused on price, 30% are focused on service, and 40% will swing from price to service depending on whose messages is louder. I know that I already capture the service customer because he loves our message. So I focus all of my marketing dollars on that last 40%. None of my marketing material has anything to do with price, it's all about the relationship you're going to create with us once you're our customer. So I get 70% of the market by marketing to 40% of the population. Wal-Mart will always get the price-focused customers, and that's fine. They won't be distracting your staff, or wasting your time."
  • Wal-Mart frees you from a transactional mindset. "Zane's sells at full price 362 days year. I have three days where there's an opportunity to buy stuff at discount. The rest of the time I'm a full price consistently priced retailer. So customers don't ever have buyer's remorse, because our prices are not in this crazy up-and-down swing." Zane does however, offer 90 day price protection to customers, promising to refund the difference between his price and a lower price on the same item found elsewhere, plus 10%. He also routinely gives away anything that costs less than one dollar. His strategy is all about getting customers to come back again and again, since he has actually calculated that the lifetime value of every customer is $12,500. "When we started adjusting our thinking about our customers so that we began to consider the lifetime value of their business, we could shift our thinking about what we were willing to spend to turn all those one-time purchases and a lifetime customers," he says. "Any business that isn't thinking along those lines is simply playing in the wrong game."
  • Wal-Mart can never be the hometown favorite. "We're adding to the quality of our community rather than diminishing it," says Zane. "We pay real wages, we have a 401(k) plan, our own foundation, and a scholarship fund." Zane's has also given away bicycle helmets at local schools, donated bicycles to underprivileged kids at Christmas, and sponsored Little League teams, the Boy Scouts, regional bike races, and triathlons. Of course, Wal-Mart is charitable as well. But the bottom line is that big companies are faceless and have a very hard time making community connections that come off as authentic. Wal-Mart may sell what you sell, but it can't be who you are.
How do you feel about Wal-Mart's impact on local small businesses? Should small companies fight to keep the retail giant out, or welcome it with open arms?

Further reading:

Treat Your Customers Like Lifetime Investments
One Family Business Owner's $10 Million Secret to Success
Why Customer Service Buzz is the New Marketing